Flashback to 1929

November 1929 headlines

I found an amazing piece,  Reactions of the Wall Street Slump, published by The Economist in its November 23, 1929 edition.

I chose the following paragraph that was written days after the month long collapse of the stock market, because it's truly eerie:

How far this will extend must at present be a matter of conjecture. A great deal must in any case depend upon the situation of the banks. The one influence that could throne back the full brunt of the speculative collapse upon industry and produce a real depression throughout the country would be banking trouble. Certain Wall Street banks made some spasmodic efforts to check the slump, but were careful to dispose of their holdings at the first opportunity, and there is no reason to suppose that they have seriously handicapped themselves by efforts which never went the length of attempting to stop the rot by holding large blocks of stock off the market. There are, however, known to be large quantities of securities not yet absorbed by the public which for the time being have to be carried by banks and finance houses. Many banks will, moreover, have made very large bad debts, while others will have to finance customers for a long or short period. Some bank failures, no doubt, are also to be expected. In the circumstances will the banks have any margin left for financing commercial and industrial enterprises or will they not? The position of the banks is without doubt the key to the situation, and what this is going to be cannot be properly assessed until the dust has cleared away. On the whole, the experts are agreed that there mint be some setback, but there is not yet sufficient evidence to prove that it will be long or that it need go to the length of producing a general industrial depression.

The lack of liquidity, compounded with fear, and the underlying problems like CDS, CDOs, subprime MDS, over indebtness at all levels (from credit cards to companies and government) gives me a light stomach, like when I'm looking down from the edge of an abyss.

Comments

[Jason Rines...:]

Yes, serious trouble is on the way but that's no longer news to me and almost no other fundamental economist. Check my comments from over a year ago. Now, the deal is this.

The USA can either protect it's citizens, shield the blow and invest in job creation or it can force the citizenship to pay off the foreign public debts and lobby.

The first Paulson bill was designed to serve the foreign banking interests and domestic politicians whom committed the crimes or are guilty by winking at the problem for years.

So it's like this, continue shafting the middle class until the middle class decides it has had enough and jumps off the debt treadmill from a failed economic policy of 25 years, foreign interests pull out there dough at that point and we have either a physical or voter revolution (around 2012). Or you take care of the US citizenship and force debt restructuring with sovereign nations which will cause serious geopolitical fallout. This would probably be an easy choice for our government if the USA was more energy independent!

The foreign lobby has it's claws into our political system. It is very hard to serve two masters. I know whom I would choose but I am not in the White House. Plans sent to Washington these last few years by those whom considered themselves economists and Patriots have largely fell on deaf ears on both sides of the aisle. Some pride of failed foreign policy by overstretching comes into play as well. Hard to admit we can no longer be the world's policemen for some in Washington.

2008 Oct 01 12:17 PM